Company Income Tax – Rates, and Regulations

Corporate tax (also known as company income tax) is a tax levied by the country on the income earned by legal entities. Tax legislation of various countries differs. Legal entities can either be taxed on their net profit or by dividend. Requirements as to which companies are taxed are also different. However, these are normally foreign corporations continuously established in a certain country or companies registered for tax purposes within the jurisdiction.

Company Income Tax Rate Worldwide

Company income tax rate varies throughout the world. Its rate can reach up to 40% in such countries as the USA. It comprises 30% in Australia and Japan and 19% in the United Kingdom. However, there are countries known as “tax haven.” These are countries with low or zero tax rates in different areas of life and business activity. Tax rates are not the only distinctions between the taxation systems of the countries.

Most countries levy taxes on company income. However, company income tax rate differs depending on the level of the corporation’s income as well as the size of the legal entity. Please note that according to the worldwide practice, this tax is levied on both domestic and foreign companies.

The United Arab Emirates is one of the most well-known examples of offshore areas. The government of an offshore zone does not impose income or company income tax, dividend tax, tax on interest and withholding tax. Moreover, there are about 40 free trade zones on the territory of the UAE. The main characteristic feature of free trade zones is the exemption of all main taxes including tax on import and export. Therefore, it is very beneficial for a company to be registered in an offshore zone. Offshore zones offer a truly facilitating business environment for investors and entrepreneurs. This creates an excellent investment climate and gives a compelling incentive for further business development.

When it comes to the definition of company income tax, it is necessary to understand the concept of “net profit.” Net profit of the company is calculated on the basis of subtracting total expenses from the total revenue. In its turn, company income tax is calculated on the basis of the company’s net profit.

The calculation of the company income tax requires certain precision and accuracy. Taxpayers are obliged to submit declaration annually. This job demands a good knowledge of the existing rules of a certain jurisdiction. Any mistake can cost a company a lot since there are penalties for committing them.